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Vorian Atreides
04-04-2012, 12:15 PM
EC released a paper outlining a sample higher-order (Bloom's Taxonomy) question with "sample solution" outlining what the graders are asked to look for.

There are samples for each Spring Exam. The Exam 5 sample is on ratemaking.

Note that there is a caveat that they'd consider other questions, so it's not about focusing on the "solution" itself so much as what's needs to be disclosed for the solution.

jesusislord
04-04-2012, 12:36 PM
wow, i wonder how much that ratemaking question was supposed to be worth. that was like a 4-5 pt question.

Vorian Atreides
04-04-2012, 01:23 PM
Here's the problem in full (my apologies for any formatting not fitting on your screen).

Open discussion on other solutions than what's provided?

From Exam 5:
Given the following information:

. . . . .Multivariate Results
. . . . . . . . . . Impact of All
. . . Current . . .Indicated. .Indicated Rating
Deductible .Relativity. . .Relativity .Plan Changes
Full Coverage . 1.20 . . . 1.25 . . . 4%
. \$250 . . . 1.10 . . . 1.10 . . . -3%
. \$500 . . . 1.00 . . . 1.00 . . . 0%
.\$1,000 . . . 0.90 . . . 0.98 . . . 7%

.Total . . . . . . . . . . 0%

. . . . . . . . . . . . . . . Total
. . . . . . . . . . . .# of . . .number of
. . . . . . . . . . .policies . . potential . . Total . . Number of
. . . . . . . .% Policy . .cancelled . . renewal . .number of . . accepted
. . . .Policies as of . .Growth in . .at renewal . . policies in . .quotes in . . quotes in
Deductible .Dec. 31 2010 . . 2011 . . . in 2011 . . 2011 . . 2011 . . 2011
Full coverage . 5,000 . . . 302% . . 380. . . 4,500 . . 43,000 . . 15,480
. \$250 . . 30,000 . . . -1% . . 2,880. . . 29,100 . . 10,000 . . 3,200
. \$500 . . 45,000 . . . -2% . . 5,535. . . 44,000 . . 20,000 . . 6,000
\$1,000 . . 12,000 . . . -17% . . 2,745. . . 11,500 . . 7,000 . . 1,050

Total . . 92,000 . . . 13% . . 11,540. . . 89,100 . . 80,000 . . 25,730

The Chief Underwriter informs the Actuary that all deductibles are available for new businesses. However, the Chief Underwriter informs the Actuary that the \$1,000 deductible is mandatory for risks with a high frequency of claims in the past 5 years. The Actuary is also aware that a marketing campaign has been launched in the summer of 2011 that promotes the zero-deductible policy (i.e., the full coverage deductible). The company is operating in a deregulated free market.

Fully justify an adequate differential for each deductible by assessing additional considerations and constraints that the Chief Underwriter should consider.

Vorian Atreides
04-04-2012, 01:24 PM
wow, i wonder how much that ratemaking question was supposed to be worth. that was like a 4-5 pt question.
Agree that this will be at least a 4 point question--one point for each deductible.

HuskerCAS
04-05-2012, 06:56 PM
Do you think it will be common that we don't need specific solutions, just well thought out judgments? The first time I did it, I tried to ponder who I would actually calculate a numeric answer. I then cheated and flipped to the solutions and once I saw the 'acceptable ranges' I /facepalmed because I was trying to hard.

What sort of signal would the question send to indicate its a judgment question vs. a calculation question ('here is *everything*, make a rate indication and consider all options as on the table').

TRINIDON2K
04-06-2012, 10:01 AM
is "justify" code word for don't waste time calculating???
I too wasted time trying to figure out what to calculate then got fed up and looked at the answer and thought "that's one i would have got 0 points on"

Glad it's not on the exam.

TRINIDON2K
04-06-2012, 10:13 AM
I can't get over how ridiculous this is. That answer is over 500 words!!!!!
Just estimating here... but you'd need 2 minutes to read the problem, 1 minute to think about a response for each deductible, 4 minutes to write a response for each deductible.

That better be an 8 point question.

This is the kind of questions that exam makers are doing after all that negative feedback from the ridiculously long exam they gave us last year. Can't wait for those SOA general casualty exams.

Scars
04-06-2012, 10:44 AM
I can't get over how ridiculous this is. That answer is over 500 words!!!!!
Just estimating here... but you'd need 2 minutes to read the problem, 1 minute to think about a response for each deductible, 4 minutes to write a response for each deductible.

That better be an 8 point question.

This is the kind of questions that exam makers are doing after all that negative feedback from the ridiculously long exam they gave us last year. Can't wait for those SOA general casualty exams.

This is an exam-thread meltdown of epic proportions.

TRINIDON2K
04-06-2012, 11:19 AM
It's ridiculously long... not to mention its more an underwriting question than an actuarial question... i bet you won't see anything like this on a CPCU exam.

04-06-2012, 03:48 PM
At a minimum, this would seem to be a 6-8 point question, maybe half a point for each differential, and 1 point for each written answer. The real difficulty in this problem would be the amount of time spent on a question that would also be roughly 10% of the exam.

I would also have a problem with the committee putting a blooms taxonomy type of problem on the exam and have it worth so much when this type of problem has never been tested before.

Vorian Atreides
04-06-2012, 04:36 PM
Personally, I don't think the CAS will ask the full question on an Exam. Rather, they'll ask you to select and justify the factor for just one of the deductible options and make it a 3-5 point question.

The purpose of the sample question is to show us (1) what they view as being a "higher-order Bloom's Taxonomy" question, and (2) an illustration of what they expect for an answer (not that they answer they give would be the only solution accepted).

Vorian Atreides
04-06-2012, 04:43 PM
It's ridiculously long... not to mention its more an underwriting question than an actuarial question... i bet you won't see anything like this on a CPCU exam.
If you ignore what underwriting and marketing are doing, you're going to set your factors wrong every time. Especially if underwriting/marketing change what they're doing.

For example . . .

Underwriter Joe: "Hey, we used to not do this, but we're now making \$1,000 the minimum deductible for all of our high-risk policies."

Now, suppose that 25% of your "Full Coverage" deductible book are these high-risk policies. What does this tell you about the future experience of this book? Will your historical data support it?

TRINIDON2K
04-06-2012, 05:47 PM
This is section A7 on the syllabus... 0 to 5 percent. That means at most 4/80 points... or about 12 minutes for this question.

They say on the first page that this was on on the Spring 2012 exam but it was removed to use an example.

Need Vacation
04-10-2012, 09:16 AM
I like how for selected relativity for the \$500 deductible, which in the model answer it already states that it's a base relativity(!), they go on writing a whole paragraph that leads you to do nothing in the end. :palmface:

Vorian Atreides
04-10-2012, 09:36 AM
I like how for selected relativity for the \$500 deductible, which in the model answer it already states that it's a base relativity(!), they go on writing a whole paragraph that leads you to do nothing in the end. :palmface:
Agree . . . there should be a discussion about the base rate here rather than a discussion about the factor . . . unless you decide to change the base to the full coverage (which would make the most sense, really).

TI30XS
04-19-2012, 10:39 AM
What's the "Impact of All Indicated Rating Plan Changes"? This information doesn't seem to be used at all in the answers.

Vorian Atreides
04-19-2012, 12:57 PM
What's the "Impact of All Indicated Rating Plan Changes"? This information doesn't seem to be used at all in the answers.
There may be changes to other aspects of the rating plan that aren't shown here, but may have an impact on one or more of the deductible options.

For example, suppose that car rental is a part of the plan and there are three options to choose from: No car rental (base), Limited Car Rental (\$x/day, \$y per incident total), and Full Car Rental (\$x/day, no per incident limit).

Suppose that the limited car rental rate increased by 5% and the full car rental rate increased by 15% resulting in an overall effect of 3% for this coverage. Most likely, there is going to be a correlation between which of these options are selected and which deductible is selected--namely, those purchasing the Full coverage limit are more likely to opt for the full car rental option while those opting for a \$500 deductible are more likely to opt for the limited or no car rental.

So, the impact of changes for this rating variable may impact the business decision of what to do with the deductible factors. For example, there might be a business decision to limit increases for a policyholder in order to retain business.

And just because CAS didn't include it in their "sample" answers doesn't mean that this info is extraneous (or irrelevant). In fact, their sample answers are intended to show how one might respond and the level of detail that might need to be presented to get full credit. The take away here: you don't have to include everything in the info presented to get full credit--the focus is on adequately supporting the choice you actually made. (And I'll be inclined to believe that they're also looking for qualitative aspects to your reasoning and not just "here's what the numbers tell us we should do".)

TI30XS
04-20-2012, 06:44 AM
There may be changes to other aspects of the rating plan that aren't shown here, but may have an impact on one or more of the deductible options....

:wav:

Revis Island
04-20-2012, 09:28 AM
I agree with Trinidon. I think in light of the exam situation last year (not just five but all exams) the impending audit of the committee, etc, this question is crazy. I sure hope they don't load up on a bunch of these questions. Honestly, I thought last year's exam 5 was more than fair (and I did not pass). It was long, but there was nothing like this question.